Italy: Political gridlock coming to an end - ING

Paolo Pizzoli, Senior Economist at ING, points out that Italian President Mattarella has decided to put an end to the political gridlock by proposing a neutral, temporary government until December. If it fails to get parliamentary support, Italy will go back to the polls either late in July or, more likely, after the summer, he further adds.

Key Quotes

“The two-month long history of this new legislature has so far been marked by repeated failures to form a viable political government alliance.”

“Having taken stock of the persisting gridlock, President Mattarella announced he would hold a final one-day round of consultations to check whether there was any unexplored alternative solution left to form a "political" government.”

“Ground checking exercises conducted over the weekend by the main party representatives made it clear that chances of a last-minute agreement on a "political" solution were thin.”

“In the televised press conference, President Mattarella said all previous cross vetoes had been confirmed during the meetings and that no new possibilities for an agreement had emerged. He added that since the beginning of the legislature he had ruled out the possibility of a minority government (Salvini’s last proposal) and that the current caretaker government led by Paolo Gentiloni had completed its mission and could not be prorogated.”

“The first reactions of Di Maio and Salvini to President Mattarella's proposal have not been encouraging. Both said they would not support any "neutral" government, calling for a July vote instead.”

“As we write, the chances of success of the neutral government attempt look low. What about the schedule? Once being officially sworn in, the new neutral government will have to undergo a confidence vote in both branches of the Italian parliament within ten days.”

“Should it fail to get it, President Mattarella would dissolve parliament, and new elections will be held between 45 and 70 days after the parliament dissolution. Setting the vote on 22 July, the last possible date in that month, would require the parliament to be dissolved no later than the end of May.”

“This is a narrow window of opportunity, which makes a September/October alternative more likely, in our view. The ball is now in the parliament's court. Even though the odds seem to point to a snap election, this is not a done deal yet. The disclosure of the line-up of the new neutral government might still have an impact on the ultimate decisions.”